The Four Categories to Qualify for the Low Income Community Bonus Adder

The Low Income Community Bonus Adder provision in the Inflation Reduction Act is different from all the other bonus adders and the Investment Tax Credit (ITC) itself, because it is an allocated credit. That means there is a limited number available. 

There is a cap of 1.8 gigawatts annually that will be allocated, or awarded, to applicants with a set amount of MW available in each of four categories.

To learn more about each of the four categories that can qualify your project for the Low Income Community Bonus Adder, we hear from Lee Barken, Chief Community Officer at CollectiveSun in an excerpt from the new Inflation Reduction Act Solar Provisions: Low Income Community Bonus Adder course. Be sure to check out all 4 courses from CollectiveSun related to provisions in the Inflation Reduction Act by enrolling in their series – Inflation Reduction Act: Solar Provisions Explained Series.

Low income community bonus adders are going to raise probably 2 questions:  

• What kind of projects?
• What’s a low income community?

And we’re going to talk through those. The 1st is – we talk solar and wind and battery (if it’s associated), that’s going to be the scope.  

But what is a low income community? 

A lot of different ways to tackle this and here’s how the Treasury who, by the way, engaged DOE when they got this bill text said, how are we going to figure this out? Let’s ask the DOE for help. They’re experts. They’re really good at this stuff. And so this is where the rules landed.

We’re going to take 1.8 gigawatts per year, and we are going to allocate those among four different categories. 

So a 10% bonus adder is going to be in the location for the geography where the project is cited in a low income community. We’ll dive into that in a minute. But just know that’s a 10% bonus adder. That’s going to have 700 megawatts out of the 1.8 allocated. 

Located on tribal land, that’s also a 10% bonus adder that has a 200 megawatt allocation. This is per year.  

Then qualified low income residential building project. Big word. When you hear that, just think – affordable housing project. That’s anytime you hear category 3, just think – affordable housing project.  

Category 4 – qualified low income economic benefit project. Whoo, another big word. When you hear category 4, just think community solar. And I’ll tell you why. It doesn’t have to be just community solar, but that’s kind of it.

This is not written anywhere this way, but this is sort of where my head is gravitating towards why this is written this way.    

So category 1 and 2 are 10% bonus adders. Category 3 and 4 are 20% bonus adders. And they have these allocations 700 MW, 200 MW, 200 MW, 700 MW. Those add up to 1.8 gigawatts per year that are going to be allocated.